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Suntech Unit Declares Bankruptcy

HONG KONG — Suntech Power, a Chinese manufacturer that became the world’s largest producer of solar panels by 2011 only to be battered by plummeting prices, announced on Wednesday evening that its main operating subsidiary had been pushed into bankruptcy by eight Chinese banks.

Suntech was the Icarus of the solar panel industry, with production that soared year after year on heavy investment, as Western investors bought up its New York-traded shares and its international debt issues. Part of a massive Chinese government effort to dominate renewable energy industries, Suntech grew to 10,000 employees in its hometown of Wuxi and even set up a small factory in Arizona to do further assembly of panels there.

But a 10-fold expansion of overall Chinese solar panel manufacturing capacity from 2008 to 2012 produced a three-quarters drop in solar panel prices, undermining the economics of the business. Rapid expansion of natural gas production in the United States and a curtailment of subsidies in the European Union also hurt solar panel prices, as did an American imposition last year of import tariffs totaling about 40 percent after an anti-dumping and anti-subsidy investigation.

The European Union is also completing its own trade investigation of Chinese solar panel shipments that could lead to steep tariffs there as well.

The Chinese banks quietly asked a court on Monday in Wuxi to declare the operating subsidiary, Wuxi Suntech, to be insolvent and begin restructuring it. The operating subsidiary notified the court on Wednesday that it did not object to the insolvency petition.

Suntech Power, the parent, said that it was not filing for bankruptcy and would continue to honor warranties on the company’s solar panels.

The bankruptcy filing is widely expected to lead to a takeover of the Wuxi operations by Wuxi Guolian, a financial conglomerate controlled by the city government of Wuxi. A woman answering the phones at Wuxi Guolian’s headquarters said on March 13 that her company was involved in a Suntech acquisition but declined to provide details or her name.

On Tuesday, Suntech Power announced the appointment of a new president, Weiping Zhou, a longtime Wuxi Guolian executive who had previously been the chairman of the company’s futures trading subsidiary.

In its statement announcing the bankruptcy of Wuxi Suntech, Suntech Power did not mention any immediate role for Wuxi Guolian. David King, the chief executive of Suntech Power, said that the company “will continue to work closely with all of our stakeholders and take the necessary steps to put Suntech back on track for growth.”

Suntech Power is traded on the New York Stock Exchange, and had a market capitalization of $16 billion at its peak. The company failed to make payments last Friday on $541 million worth of convertible debt.

The bankruptcy filing of Suntech Power’s Chinese subsidiary without a filing by the parent may cause acrimony over whether foreign creditors are being treated unfairly compared to domestic creditors in China. It is rare for Chinese companies to file for bankruptcy, as the government has sometimes stepped in first to help them and avoid damaging the broader reputation of Chinese companies for creditworthiness.